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Retail sales fall in April

22/05/2008

Retail sales fell slightly in April for the second month running, but analysts warn the situation could be worse than the figures suggest.

Data from the Office for National Statistics (ONS) show between March and April, sales volume fell 0.2 per cent on a one per cent fall in sales from food stores, offset by a 0.2 per cent rise in non-food stores and a 1.1 per cent rise in the non-store retailing and repair sector.

Taking the three-month view, sales volumes to April rose by 1.5 per cent compared with the previous three months, following a 1.9 per cent growth in the three months to March.

Compared to last year, April sales were 4.2 per cent ahead, the ONS said.

Howard Archer, economist for Global Insight, said the figures are "hard to believe" given the state of the economy. He said: "Taken at face value, the retail sales data suggest the consumer is only gradually and reluctantly reining in his spending despite facing serious headwinds.

"Nevertheless, we suspect that consumers' resilience will be increasingly eroded by these headwinds over the coming months, which include muted disposable income growth, a serious squeeze on purchasing power coming from higher utility bills and elevated food prices, a substantially softer housing market, markedly tighter lending conditions, and increased debt levels."

A slowdown in the retail sector is good news for the Bank of England, Mr Archer added, as a drop in spending is necessary to rein in inflation.

Vicky Redwood from Capital Economics agreed that the official statistics looked out of place in the current economic climate.

"The annual growth rate in April was an extremely healthy 4.2 per cent and miles away from the 0.5 per cent to 1.5 per cent growth rates suggested by the CBI and BRC sales surveys," Ms Redwood said.

She added: "We continue to think that the weaker survey and anecdotal evidence sits far more comfortably with the economic backdrop of plummeting consumer confidence, falling house prices and the squeeze on real incomes."